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Home Page Official Publication of the State Bar of California January2004
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General counsels face some tricky ethical problems

By Diane Karpman

Ethics expert Diane Karpman can be reached at

At times almost every attorney thinks that going "in-house" is a cakewalk. Nothing could be further from the truth, as recent issues demonstrate. In-house lawyers face most of the same problems as lawyers in private practice, plus some additional ones.

Look at Appendix C, Final Report of the Examiner in the Enron Litigation at The report suggests that Enron's general counsel may have engaged in legal malpractice and/or breach of fiduciary duty because he "accepted the conclusions of others without probing or testing them." Is it realistic to expect him to do otherwise, considering that the Enron legal department "probably had thousands of projects being worked on" concurrently, as do many large law firms? If general counsel knew or should have known, then why did he accept equity stock in Enron as part of his compensation package? Other viable defenses may exist, but taking $1.5 million in soon-to-be-worthless stock, in addition to other compensation, seems to show a modicum of good faith.

Another problem for in-house lawyers is the responsibility for corporate document retention policies. Routine document destruction, poorly timed, may look suspicious under some circumstances.

If in-house counsel is unfairly terminated and seeks redress in litigation they still must maintain client confidentiality. Confidentiality is much broader than attorney-client privilege. Attorney-client privilege, an evidentiary rule, requires a proceeding and an attempt to compel disclosure. Confidentiality, on the other hand, is vast and all encompassing, and includes both "confidences" and "secrets." Confidences is information communicated by the client that would ordinarily be protected by attorney-client privilege. Secrets, however, includes all information learned during the representation, from any source, which could be adverse to or embarrass the client.

California lacks an exception for information that is "generally known." In some recent cases, lawyers have tried to claim that concept as a defense to disclosure. Disclosing confidential information which can be used against a client's interest can be viewed as disloyal. Therefore, even in a retaliatory discharge case, any disclosures in a complaint or civil action must be limited to that which is absolutely necessary.

Everybody needs to be aware of  "metadata," especially when collaborating on an e-mailed document. "Metadata" is invisible information automatically recorded by word processing programs like Word and WordPerfect, and which can be easily exposed by enabling a feature in those programs. For example, in Word, the "track changes" facility can show opposing counsel the author, edits and modifications. So many lawyers are unwittingly and inadvertently including secret (seemingly invisible) information in their e-mails that New York maintains that merely "looking" at metadata is unethical.

As a California lawyer, competency may require that we "look" and use that information for our client's benefit. Or should we adopt a "don't look, don't tell" policy? Sanitizing is not easy, but be sure to check your word processing program's homepage for a fix.

Ethics expert Diane Karpman can be reached at or 310-887-3900.

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